In a rare statement, online retailer KlearGear spoke out Monday against a recent default judgment that it lost in federal court earlier this month in connection to an online review lambasting the company's customer service.

In the case, a judge ruled in favor of a Utah couple (Jennifer and John Palmer) who had criticized the online retailer for not delivering a less-than-$20 order in December 2008. The couple sued in a Utah federal court after KlearGear told the Palmers that they had to pay $3,500 or remove the post. When they did neither, KlearGear attempted to get the money via a collection service, which damaged the Palmers' credit.

When KlearGear did not show up in court or respond to the lawsuit in any way, the Palmers won by default.

In an e-mail sent to Ars on Monday, KlearGear said it had no legal obligation to defend the suit because it needed to be served with the civil lawsuit in France (where its parent company, Descoteaux Boutiques, resides) after which it would "vacate the judgment and litigate."

Further Reading

Never-delivered $20 purchase begat a bad review, which led to litigation.

The e-mail was signed by “Vic Mathieu," without listing a job title.

Neither KlearGear nor Descoteaux Boutiques responded to repeated requests for comment via phone and e-mail. A call to the Paris number listed on the e-mail for Descoteaux Boutiques resulted in an automated message in Canadian-accented French and then English saying to call back during European business hours, which Ars has already done more than once.

“A variety of hardships and emotional distress”

The dispute between KlearGear and the Palmers has now entered the truly surreal.

According to Jennifer Palmer, the original purchase the couple criticized online consisted of “a perpetual-motion desk toy and a bendable smiley-face keychain” that were to be Christmas gifts to her from her husband John.

After repeatedly attempting to contact the company by phone and e-mail, the couple reached a customer service representative, who claimed that the items had never been paid for and had been cancelled.

Three years later, her husband John Palmer received an e-mail demanding that the review be deleted within 72 hours or he would need to pay $3,500, as he was in violation of the company’s “non-disparagement clause” of its terms of service. However, such a term did not appear in the Terms of Sale and Use that the Palmers had agreed to when they placed their order in 2008.

When the Palmers refused to pay or take down the review, KlearGear sent a collection agency to them for the $3,500, which damaged their credit by August 2012.

According to the Palmers' 2013 lawsuit, "the Palmers have been delayed or denied outright in their attempts to obtain credit and suffered a variety of hardships and emotional distress as a result. In particular, in October 2013, the Palmers spent three weeks without heat in their home for themselves and their three-year-old son when their furnace broke and they were unable to obtain credit to purchase a new one.”

The federal judge is set to award damages to the Palmers next month.

“We will vacate the judgment and litigate”

Mathieu’s e-mail seems to suggest that KlearGear and Descoteaux Boutiques were only recently informed of the lawsuit and were not properly served and therefore do not consider it valid. While the e-mail doesn’t say so specifically, it seems to suggest that service may have been attempted via one of its “third party providers.”

KlearGear lists its US address as Grandville, Michigan, and states that “by accessing this Web site you and KlearGear agree that the laws of the State of Michigan will apply to all matters relating to use of this Web site, without regard to conflicts of laws principles. You and KlearGear also agree and submit to the exclusive personal jurisdiction and venue of the State and Federal Courts found in Kent County, Michigan, with respect to such matters.”

“None of our third party providers are statutory agents that are authorized to receive service of process,” Mathieu wrote.

He continued:

After we first learned on this dispute on the 22/04/14 via an e-mail from Aubrey Broome at Hoole & King, we have requested more information. No information has ever been provided. Mr. Palmer's attorney, Scott Michelman of Public Citizen Litigation Group, has since learned that DBS [Descoteaux Boutiques] was never properly served under the Hague Convention and concealed this information critical of the court to improperly obtain a judgment by default. Once DBS has been served, we will vacate the judgment and litigate.

In written communication to Mr. Palmer on 4 June 2012, we informed him that the disparagement clause in our conditions of sale was present the 22 December 2008 when he has certified to us that he has read, understood and agreed to it.

KlearGear’s representative then provided links to its “three forks” of its website's terms of use from that time, which today have been consolidated into two.

Paul Alan Levy, one of the Public Citizen lawyers representing the Palmers, remains skeptical, saying that serving KlearGear with the lawsuit in France is not necessary.

"We have a judgment, and if they want to overturn the judgment, they have to take some action in the United States," he told Ars. "I think the ball's in their court. As of April they knew about this lawsuit and for whatever reasons chose not to take action in the Utah court. They screwed up, and now the burden is on them to file a motion. They could have moved before the judgment, and now they have a higher burden, and it remains to be seen how they will meet that burden. It is very weird."

Nevertheless, Matthieu said in his message that the company’s “Non-Disparagement Clause” was never deleted from the site. Rather, it simply changed URLs.

“If a customer disagrees with any merchant of policies, they are free to shop elsewhere,” he wrote.

“If Mr. Palmer's debt remains unpaid, it will be re-reported to credit bureaus by subsequent owners of the account,” Mathieu concluded. “Ironically, if Mr. Palmer had simply approach KlearGear first last fall and requested a stay to finance their new furnace—we would have worked with him. We are human beings. Instead, he has chosen a public forum.”

Promoted Comments

Well this shouldn't be difficult. KlearGear claims to be located in Michigan. If they're owned by a foreign company, they need to register with the Michigan Secretary of State's office, and identify who their registered agent is for receiving legal documents. But do a corporation search there and nothing comes up for "KlearGear", nor their parent company "Descoteaux Boutiques". So they can't claim that they didn't get proper service if they don't have the proper government identification. If the State of Michigan had the time and resources, they should check out why a company claims to be doing business in their state, but doesn't appear to be licensed there.

On top of that, yeah, they've got another thing coming to them if they think they can just claim French jurisdiction, while attempting to use US collection agencies. The agencies are going to be obeying US court orders. So this current debt gets wiped out, and any future ones attempted are going to be flicked aside even faster. What's more, they're going to be on the receiving end of a collection notice soon. And while their French assets might be safe, they might find wherever they do business here in the States a bit difficult.